Ukrainian govt officials go to Washington for talks on cooperation with IMF

The IMF mission has been working in Ukraine since October 25

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KIEV, November 2 (Itar-Tass) —— Ukrainian Vice Prime Minister Sergei Tigipko and Finance Minisyer Fyodor Yaroshenko left for Washington on Wednesday, November 2, for talks on further cooperation with the International Monetary Fund (IMF).

“Acting on instructs from the prime minister, Tigipko and Yaroshenko have left for Washington for talks with the IMF leadership,” the prime minister’s spokesman Vitaly Lukyanenko said.

The IMF mission has been working in Ukraine since October 25.

In July 2010, the IMF approved a programme of financial aid for Ukraine until 2012 in the amount of more than 15 billion U.S. dollars. The first portion of 1.89 billion U.S. dollars was disbursed last year. However further aid was suspended, and negotiations on its resumption have been on since then.

Thanos Arvanitis, Mission Chief for Ukraine, said during his previous trip to Ukraine in February 2011 that considerable progress had been reached in the talks and resolved almost all issues.

Azerbaijan confirmed that the Ukrainian government and the IMF had reached a compromise on the majority of provisions.

The most debatable issues include pension reform, and higher tariffs for natural gas, electricity and hot water.

The government wants to raise the tariffs gradually throughout the year depending on the situation on the market, but the IMF insists that natural gas tariffs be raised by 50 percent from April 1.

Under the memorandum, Ukraine also plans to reform the pension system to make it more financial sound.

Ukraine performs and overperforms its obligations to the International Monetary Fund, Ukrainian President Viktor Yanukovich said earlier.

“The obligations we assumed with regard to the IMF are performed by 100 percent and overperformed, even though the measures we are planning today have met a controversial reaction in society,” he said.

Yanukovich said these were forced steps because no reforms had been carried out in Ukraine over 19 years of its independence.

“For 19 years there was talk of reform and a struggle for power, there were clashes and score settling,” he said, adding that Ukraine “needs to reform itself very quickly for the sake of the future.”

On July 28, 2010, the IMF Board of Governors approved a 15.15 billion U.S. dollars loan to Ukraine for 2.5 years. The previous two-year programme was approved in November 2008. Under it Ukraine received about 11 billion U.S. dollars of the intended 17 billion U.S. dollars. In the autumn of 2009, the programme was suspended because Kiev had failed to perform its obligations. Specifically it had not raised gas prices for the population.

“The goal of the authorities' economic program is to entrench fiscal and financial stability, advance structural reforms, and put Ukraine on a path of sustainable and balanced growth. Policies under the program include fiscal adjustment to contain the 2010 consolidated general government deficit to 5.5 percent of GDP in 2010 and 3.5 percent in 2011 with a view to setting public debt firmly on a declining path. The fiscal adjustment is to be achieved by tax and social security structural reforms, expenditure rationalisation combined with efforts to improve tax administration. Additional resources are allocated in the budget to protect the poorest segment of the population,” the IMF said earlier.

Financial sector reforms are focused on restoring the health of the banking system, including by ensuring an adequate level of capitalisation and strengthening the independence of the National Bank of Ukraine, Arvanitis said last July after visiting Ukraine.

“Energy sector reforms will help to strengthen the gas sector and improve Naftogaz's financial position, limiting its deficit to 1 percent of GDP in 2010 and balancing its finances in 2011, while, at the same time, protecting the most vulnerable people. Legislative reforms will be aimed at modernising the economy and improving business environment, to restore robust economic growth over the coming years,” the statement said.

Yanukovich has promised to do his best to resume cooperation with the International Monetary Fund.

“I will do everything possible to resume cooperation with the IMF, but prevent a decline in social protection,” he said.

The goals set by the Ukrainian authorities can only be achieved using cheap loans, Yanukovich said.

“This leaves only cooperation with the IMF,” the president said.

He believes that it in order to develop successful cooperation, the Ukrainian government should concentrate on the resolution of such problems as budget deficit, pension fund imbalances, and unregulated cash flows of Naftogaz Ukrainy.